It is often said that the devil is in the details, a maxim that should be applied especially in banks, which are the closest thing to the devil that you will encounter in your life. And you have to be especially careful with mortgages where for many years we have seen how banks abused with clauses that we did not know were there.
When taking out a mortgage, you should not only look at the interest rate, but also at the terms and conditions, which may include fees and the need to take out other linked products, which used to be called “links” and now have a nicer name, “bonuses”. Although most banks used to require direct deposit of payroll and life and home insurance, it is now more common for them to offer bonuses if you take out alarms, direct deposit utility bills, use cards or make contributions to pension plans.
Although insurance can be beneficial if it reduces interest rates, not all of them are mandatory. Clients can decide to take out these products with the mortgage bank or with another entity, although giving them up will mean losing the interest bonus. In general, it is recommended to minimize the number of bonus products to avoid additional costs that could increase over time, forcing the contract to be maintained throughout the life of the mortgage. Often, the business for the bank is precisely in these products and not in the mortgage.
Another common practice is to offer the option to pay for several years of insurance in advance through a single financed premium, which involves including the cost of the insurance in the mortgage capital. This increases the final cost due to interest. It is recommended to pay for insurance annually or monthly to avoid additional interest and to have the flexibility to renew or change the policy each year as needed.
In addition, fees for subrogation and early amortization can reach up to 2%. It is important to negotiate these fees from the beginning to eliminate them or reduce them to the minimum possible. Negotiating a fee for partial amortization to zero is a good practice.
